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The impact of the Chilean pension withdrawals during the Covid pandemic on the future savings rate

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  • Madeira, Carlos

Abstract

Chile implemented pension withdrawals during the pandemic at a much larger scale than other OECD countries. Estimating a life cycle model with survey data, I find that households consume a significant fraction of their non-contributory pension wealth, implying a tradeoff between improving public pensions and increasing savings. Counterfactual simulations show that the pandemic pension withdrawals may decrease the future savings rate by 1.7%. Furthermore, policy reforms may decrease the aggregate savings rate by 0.2% for each percentage point of solidarity tax from current workers. The solidarity taxes increase substantially the pension income of poor retirees, but their effects decline over time.

Suggested Citation

  • Madeira, Carlos, 2022. "The impact of the Chilean pension withdrawals during the Covid pandemic on the future savings rate," Journal of International Money and Finance, Elsevier, vol. 126(C).
    • Handle: RePEc:eee:jimfin:v:126:y:2022:i:c:s0261560622000535
    DOI: 10.1016/j.jimonfin.2022.102650
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    Cited by:

    1. Olivera, Javier & Valderrama, José A., 2022. "The Impact of the COVID-19 Pandemic on the Future Pensions of the Peruvian Pension System," IDB Publications (Working Papers) 12492, Inter-American Development Bank.
    2. Carlos Madeira, 2023. "Adverse selection, loan access and default behavior in the Chilean consumer debt market," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-29, December.
    3. Carlos Madeira, 2023. "The evolution of macroprudential policy use in Chile, Latin America and the OECD," Journal of Banking Regulation, Palgrave Macmillan, vol. 24(3), pages 357-380, September.

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    More about this item

    Keywords

    Savings; Pension wealth; Life cycle; Crowding-out; Covid pandemic;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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